Iran had Big Plans for its Tourism Industry, then the US Reintroduced Economic Sanctions


Iran’s once optimistic tourism industry has been left in disarray following the reintroduction of U.S. sanctions against Tehran in early August.

The move by President Donald Trump has led to tourists shying away from Iran, while locals are not spending their money either, both of which have had a negative effect on the country’s economy.

Local businessman Jalal Rashedi, who owns six hostels, is doubtful that Iran will be able to attract overseas visitors and investors anytime soon.

“(We are) simply preparing for the dark storm clouds looming in the horizon,” he told CNBC. “And they are coming, if you ask me. They come with the winter clouds.”

Things were very different when the U.S., the U.K., France, China, Russia and Germany signed a nuclear accord with Iran in 2015. The agreement, officially called the Joint Comprehensive Plan of Action (JCPOA), saw international sanctions on Iran lifted in exchange for the country curbing its nuclear program.

The move brought Iran back into the international fold and resulted in a boom in tourism — $3.2 billion in 2014, $3.3 billion in 2015, $3.5 billion in 2016, before dropping to $2.8 billion in 2017, according to the World Tourism and Travel Council (WTTC) — with the widespread construction of new hotels and the refurbishment of existing ones. Tehran worked to boost this burgeoning tourism sector with a large injection of capital and setup a ministry of tourism.

This reintegration into the global community saw companies like French hotel giant Accor move into Iran. Accor opened an Ibis and a Novotel hotel in Tehran in 2015, becoming the first international hotel chain in the country since the Iranian Revolution in the late 1970s. Now that the JCPOA has seemingly fallen apart, Accor declined to comment on whether its hotels would stay open despite Washington’s sanctions, or if its outlook on the country had changed.

Despite government efforts to limit the fallout from Trump’s decision, economic uncertainty is widespread.

In August, British Airways and Air France followed KLM in announcing an end to direct flights to Tehran, citing a lack of interest in the route. Lufthansa, Austrian Airlines and Alitalia are the only European airlines still flying to Iran.

Alireza Miryousefi, spokesman for Iran’s United Nations mission, told CNBC. he believed that “that other airlines, such as Iran Air, can fill the void.”

Hostel-owner Rashedi, meantime, said that before the 2016 U.S. election that saw Trump claim the presidency, his occupancy rates were higher. But the deteriorating relationship between Washington and Tehran during Trump’s presidency, capped by the reintroduction of tariffs, has had a substantial impact on local businesses.

“Tension is like poison to tourism,” he said. “It was more because of the positive vibe that the (JCPOA) deal created that we got more tourists. The media was more positive about Iran… the world, people got the illusion that the Islamic Republic was going to get along with the international community.”

Another local businessman, who preferred to remain anonymous, is already feeling the pain. After the nuclear accord, he initiated plans to open a new hotel in the historic city of Yazd — three years later he has been forced to suspend work on the property due to economic uncertainty.

The would-be hotelier told CNBC: “Rising inflation, currency devaluation and bad government policies have led to a scarcity in products needed for the hotel project and prices on goods are only increasing day-by-day.”

The businessman had been expecting both Iranians and overseas tourists to travel to Yazd, a city that last year was inscribed as a UNESCO World Heritage Site. Yazd has seen foreign tourism decline by 75 percent, he told CNBC, quoting local officials, and with more uncertainty looming, Iranians are less likely to spend money on travel.

Geopolitics has clearly put Iran’s domestic tourism at risk. The rial has lost almost a third of its value in the last year; this pressure isn’t likely to let up now that the U.S. has started to put its sanctions into place. With domestic tourism accounting for about 70 percent of Iran’s total tourism and Iranians becoming more cautious about spending, the industry is likely to feel economic discomfort for the foreseeable future.

Miryousefi, from Iran’s mission at the UN, admitted that his country’s tourism industry is at risk, but he remained optimistic.

“Tourism will be affected… but we are confident the sector can grow due to Iran’s inherent draw, including its archaeological and natural beauty.”

 

 

Read the full article by Leila Gharagozlou on CNBC, Sep 19, 2018


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